The attacker blew himself up inside U.S. property, Ankara Governor Alaaddin Yuksel said. The blast sent masonry spewing out of the wall and could be heard a mile away.
Interior Minister Muammer Guler said the bomber was a member of a far-left group. The U.S. State Department said it was working with Turkish police to investigate what it described as "a terrorist blast".
Islamist radicals, far-left groups, far-right groups and Kurdish separatist militants have all carried out attacks in Turkey in the past. There was no claim of responsibility.
"The suicide bomber was ripped apart and one or two citizens from the special security team passed away," said Turkish Prime Minister Tayyip Erdogan, who was attending a ceremony in Istanbul when the blast happened.
"This event shows that we need to fight together everywhere in the world against these terrorist elements," he said.
Far-left groups in Turkey oppose what they see as U.S. influence over Turkish foreign policy.
Turkey is a key U.S. ally in the Middle East with common interests ranging from energy security to counter-terrorism, and has been one of the leading advocates of foreign intervention to end the conflict in neighboring Syria.
Around 400 U.S. soldiers have arrived in Turkey over the past few weeks to operate Patriot anti-missile batteries meant to defend against any spillover of Syria's civil war, part of a NATO deployment due to be fully operational in the coming days.
U.S. Ambassador Francis Ricciardone emerged through the main gate of the embassy, which is surrounded by high walls, shortly after the explosion to address reporters, flanked by a security detail as a Turkish police helicopter hovered overhead.
"We are very sad of course that we lost one of our Turkish guards at the gate," Ricciardone said, thanking the Turkish authorities for a prompt response.
A Reuters witness saw one wounded person being lifted into an ambulance as police armed with assault rifles cordoned off the area.
"It was a huge explosion. I was sitting in my shop when it happened. I saw what looked like a body part on the ground," said travel agent Kamiyar Barnos, whose shop window was shattered around 100 meters away from the blast.
